photo: Ausra

In my new Green State column on Grist, I sit down with legendary Silicon Valley venture capitalist Vinod Khosla to talk about his approach to green tech. Khosla — who raised a record $1.1 billion for green tech investing earlier this month — believes that unless a technology can scale and be adopted in markets like China and India, it will not have a meaningful impact on climate change.

If Vinod Khosla is not speaking at one of the innumerable, and apparently recession-proof, green business conferences that seem to happen every other week, he’s giving lectures at Google headquarters, writing white papers, or, of course, inking checks to green tech startups with the potential to disrupt multi trillion-dollar global industries like energy, automobiles and building materials.

He’s something of a Valley legend: Co-founder of Sun Microsystems, then a longtime tech investor with marquee venture capital firm Kleiner Perkins Caufield & Byers and now head of Khosla Ventures, which he started in 2004 to invest in green tech startups.

Khosla and his partners had been investing their own money, but earlier this month the firm announced it had raised $1.1 billion for two funds—one of which is the largest first-time fund in a decade. It was a rather staggering amount, given that clean-tech investing has plummeted from $4 billion in 2008 to $513 million so far this year, according to PricewaterhouseCoopers, as the “Great Recession” continues to take its toll. Putting money into the two Khosla funds was the nation’s largest pension fund, the California Public Employees’ Retirement System.

It’s not the size of Khosla’s fund but what he intends to do with it that should command your attention. In short, he wants to take the green out of green investing and globalize the bottom line.

photo: Ausra

In Wednesday’s Los Angeles Times, I write about green tech guru Vinod Khosla’s new $1.1 billion venture funds — the biggest first-time fund since the halcyon days of the dot-com era a decade ago and and a strong signal that investors see a bright future in clean and green technologies. CalPERS, the United States’ biggest pension fund, is the major backer of the new Khosla Ventures’ funds:

In a sign that green technology investing is bouncing back, Silicon Valley venture capital firm Khosla Ventures said Tuesday that it had raised $1.1 billion to spur development of renewable energy and other clean technologies.

It is the biggest first-time fund in a decade and comes as venture capital investment in green technology is just beginning to recover from a precipitous fall prompted by the global economic collapse last fall.

In the first half of the year, investments in green tech plunged to $513 million from $2 billion in the first six months of 2008, according to a survey by PricewaterhouseCoopers.

But Vinod Khosla, founder of Khosla Ventures in Menlo Park, Calif., and a leading green tech guru, has managed to raise an $800-million fund to invest in early and mid-stage clean energy and information technology companies as well as a $275-million fund to finance what he called high-risk “science experiments” that may exist only in a university laboratory.

photo: Aurora Biofuels

In today’s New York Times, I write about Aurora Biofuels, an Alameda, Calif.-based startup that says it has developed a strain of algae that will double production of biodiesel:

According to Robert Walsh, the chief executive of the company, Aurora’s breakthrough was to develop algae mutations that can ingest carbon dioxide regardless of the intensity of sunlight.

“Algae have a built-in mechanism to be effective at low light and as it gets brighter during the day their uptake of carbon dioxide levels off,” said Mr. Walsh. “We’ve been able to go in and alter strains by natural mutation to cause the algae to deal with light across the whole spectrum. The algae continue to uptake C02 through brighter light and are more productive.”

A Cambridge, Mass.-based startup called Joule Biotechnologies launched this week, claiming it has produced — in the laboratory — ethanol and industrial chemicals by combining sunlight, carbon dioxide and a genetically engineered photosynthetic organism. The company is being close-mouthed about the details of the bioengineered microbe and just how it converts CO2 and sunlight into fuel.

On Monday, the latest entrant in the biofuels sweepstakes takes the wraps off a solar-powered technology designed to transform C02 and sunlight into ethanol.

“We capture the energy of the sun into a solar converter,” says Bill Sims, CEO of Cambridge, Mass.-based Joule Biotechnologies. “Inside exists a solution of brackish or gray water, nutrients and highly engineered photosynthetic organisms that directly secrete biofuels. There’s no intermediary that has to be introduced or processed.”

So far, Joule’s “helioculture” technology has only produced ethanol in the lab. But, says Sims, “We’re moving the lab outside as we speak. We aren’t expecting any surprises.” The company, backed by Cambridge venture capital firm Flagship Ventures, plans to begin construction of a pilot production plant in early 2010.

Like Solazyme and other startups that aim to produce biofuels from such things as algae and wood chips, the advantage of Joule’s technology over corn ethanol is that it does not displace agricultural land used for food production.

Worldwide revenues from the solar photovoltaic, wind and biofuels industries jumped 53% in 2008 to $116 billion and is on track to grow to $325 billion by 2018, according to a report released Tuesday by West Coast market research firm Clean Edge.

Last year’s boom, however, is unlikely to be repeated in 2009, given the global financial crisis. Signs of the slowdown were apparent last year as new global investment in green energy grew by a paltry 4.7% to $155 billion, compared to a 60% rise between 2006 and 2007. In the United States, however, venture capital investments in green tech grew 22% last year to $3.3 billion, representing 12% of all VC investments, according to figures compiled by research firm New Energy Finance.

“2009 is a year to get through,” said report author Ron Pernick during a conference call.

Of course, growth projections for renewable energy are inherently speculative. Green energy investment is strongly dependent on government policy and what the Obama administration gives today in the form of billions in subsidies and incentives a successor can take away. And then there are calamities like the extent of the meltdown of the global economy that few foresaw even a year ago.

The wind industry accounted for a third of renewable energy revenues in 2008, becoming a $50 billion business. Clean Edge projects that employment in the wind and solar industries will grow from a combined 600,000 jobs in 2008 to 2.7 million by 2018.

“As the market transitions to low-carbon fuel and electricity sources, conservation and efficiency efforts, and the deployment of a smart, 21st century grid, we believe clean energy offers one of the greatest opportunities for both local and global economies to compete and thrive,” wrote Pernick and co-authors Joel Makower and Clint Wilder.

They identified as growth areas smart grid technologies, energy storage for wind and solar farms, the Eastern Eureopean market, power grid infrastructure and micro power grids that provide electricity to self-contained facilities or areas.

California utility PG&E will buy 106.8 megawatts of electricity from a hybrid biofuel solar power plant to be built by a Portuguese firm in the state’s Central Valley.

The hybrid technology will allow two 53.4 megawatt plants to tap the sun and agricultural waste produced in surrounding Fresno County to generate green energy around the clock, according to San Joaquin Solar, a subsidiary of Portugal’s Martifer Renewables. For PG&E (PCG), 107 megawatts is just enough to keep the air conditioners running for some 75,000 homes. But if the biofuel solar hybrid performs as billed and can be scaled up, it’s a win-win – recycling ag waste – a huge and expensive problem in California – into electricity.

The percentage of electricity to be produced by solar versus biofuel and other details of the project’s design are sketchy. Andrew Byrnes, an executive with Spinnaker Energy – the San Diego company developing the project for Martifer – told Fortune that such information is “confidential” as are images of what the hybrid plant will look like and the identities of the company’s U.S. investors.

Here’s what we do know: San Joaquin Solar 1 and 2 will be built on private land outside the farming town of Coalinga. They will use long arrays of curved mirrors called solar troughs to focus the sun on liquid-filled tubes to produce steam that will drive electricity-generating turbines. That’s a standard solar technology currently operating in California and elsewhere. The biomass component of the plant will use agricultural waste, green waste and livestock manure to create heat that will generate steam.

It appears the biofuel will be used to keep the plant running at night or on overcast days. “The technologies can run simultaneously,” said Byrnes in an e-mail. “And when a cloud passes overhead (and after the sun sets) the solar facility can still generate energy, since the generation process is dependent on heat rather than direct solar radiation.”

While there is a natural gas-solar hybrid power plant under development in Southern California – see Green Wombat’s “The Prius of power plants” – San Joaquin Solar 1 and 2 will apparently be the world’s first biofuel solar hybrid.

Each power plant will each need 250,000 pounds of biomass a year to operate. Finding that fuel shouldn’t be a problem: Byrnes says a study shows that Fresno County alone produces nearly 2 million tons of ag waste annually.

About Green Wombat

Green Wombat is written by
Todd Woody, a veteran environmental journalist based in California who writes for The New York Times, the Los Angeles Times, Grist and Yale e360. He's one of the few people on the planet who have held a northern hairy-nosed wombat in the wild.

Todd formerly was a senior editor at Fortune magazine, an assistant managing editor at Business 2.0 magazine and the business editor of the San Jose Mercury News.